VW Seeks New Battery Sources

Carmaker hunts for ways to depend less on China for EV components, supplies

• The Wall Street Journal
• 5 Jun 2023
• B Y WILLIAM BOSTON

BERLIN—Volkswagen is searching the world, from Canada to Indonesia, for supplies to make the batteries in electric vehicles it sells in the U.S. and Europe less dependent on Chinese components, a senior VW executive said.

PowerCo, a subsidiary VW created last year, is leading the company’s search for natural resources and other critical battery ingredients. Ultimately, VW wants to secure its own supplies for battery plants outside China and not have to rely on Chinese suppliers for battery materials, most of whom are in China, VW board member and technology chief Thomas Schmall said.

“Today we are 100% dependent on China,” Schmall said, adding that VW’s goal was to reduce the share of Chinese components in the batteries it makes to 50% globally on average—meaning less or no reliance on Chinese supplies for battery plants in Europe and North America.

Other Western automakers also are trying to build batteries independent of China.

For carmakers, the need to rely less on China is particularly pressing because the battery accounts for a large portion of the value of an EV. By making their own batteries with components they source themselves, European and U.S. carmakers can capture a bigger share of the profits for every EV they sell.

Over the past decade, China has secured key sources of lithium, cobalt and nickel and built a homegrown industry for processing and refining them. China dominates global production of refined battery materials used in EV batteries, according to industry estimates.

That ultimately gave Chinese battery manufacturers control over more than half of the global market for EV batteries, according to analyst estimates.

The U.S. and the European Union are pouring tens of billions of dollars into catching up with China and breaking its dominance on core resources that are needed for everything from high-tech weapons to smartphones and electric cars.

VW makes 39% of sales in China but is under mounting competitive pressure there from local carmakers. It is trying to boost its market share in the U.S. and shorten its supply chains to become more resilient as geopolitical tensions rise.

VW will still use supplies from China to build batteries for cars sold there. The company holds a 26% stake in Gotion High-Tech, one of China’s largest battery cell makers. VW also will rely on Chinese knowhow in its drive for independence: In Germany, PowerCo is teaming with Gotion to build its first battery plant.

Schmall and PowerCo chief Frank Blome have traveled the world to secure resources. They have met government officials and mining operators from Canada, South America, Indonesia and Australia. There are large deposits of lithium in South America, where Chile in April said it would nationalize the country’s lithium industry to maintain control of the resource. Mexico also has taken steps to nationalize lithium deposits.